Amgen Inc. (AMGN) Earnings Call Transcript & Summary

Awesome. Thank you very much for joining us again today. My name is Mohit Bansal. I'm one of the biotech and pharma analysts here at Wells Fargo. And I have a pleasure to introduce the Amgen Management team with us today. So we have Thomas Dittrich, Chief Financial Officer of the company. We have Paul Burton, the Chief Medical Officer of the company. We have Kave, he's the SVP Global Marketing and Access. And Casey, you all know, he's the Head of IR at Amgen. Thank you very much team, Amgen, for joining us today. And I'll give the podium to Thomas for prepared remarks.

Thank you, Mohit. It's really good to be here. And before we get into Q&A, I'd like to take some time to introduce myself briefly and share a few thoughts on how we see the business today. As many of you know, it's actually my second chapter at Amgen. I spent nearly a decade here earlier in my career, working very closely with Bob and with the team at Amgen. And I've had the opportunity to serve, in the meanwhile while the way, as the CFO of 3 public listed companies where my responsibilities actually extended beyond finance into things like strategy, transformation, operations. And I gained quite some experience in a more consumer-focused health care environment as well. So I come back to Amgen, knowing the company well, but at the same time, looking at it through fresh eyes informed by my experiences over the last 12 years. Also given my recent background with a private equity-led IPO of a fast-growing company in a more consumer-focused health care setting, my focus will be on working together with my fabulous colleagues at Amgen as one team, driving execution and financial discipline to enable growth acceleration, both commercially and of the pipeline. And I'll focus on cash-on-cash returns, which is very consistent with Amgen's long-standing approach to capital allocation. Now on Q2, our second quarter results were driven by the breadth and depth of our portfolio and once again demonstrated our ability to grow through patent expirations and increased competition. Our 6 key growth drivers, Repatha, EVENITY, TEZSPIRE, rare disease in innovative oncology and the biosimilar portfolios continue to deliver. Together, they grew 26% year-on-year and represented nearly 70% of total second quarter product sales. Overall, in the quarter, total revenues exceeded $10 billion, up 10% year-on-year and 22 products delivered double-digit sales growth. And these results, including strong margin and earnings performance were achieved while increasing our investment in innovation, reflecting the sound financial structure that Amgen has as a business. And many of our medicines, and that's what's behind it here is many of our medicines address large, underpenetrated disease areas, giving us confidence that there are significant opportunities ahead of us to serve many more patients. And we are adding new indications to some of our products like TEZSPIRE, UPLIZNA and IMDELLTRA, while also broadening our geographic reach with these medicines and others. And we have recently announced exciting Phase III results from 2 of our approved medicines. As you have seen earlier this week, we announced landmark Phase III results from DeLLphi-305, evaluating IMDELLTRA in combination with durvalumab as first-line maintenance treatment in patients with extensive stage small cell lung cancer. The study demonstrated statistically significant and clinically meaningful improvement in overall survival, progression-free survival and objective response rate compared with durvalumab alone. We view these data as important inflection point for IMDELTRA. In the second-line setting, IMDELTRA is becoming a standard of care supported by strong survival benefit, clinical differentiation, NCCN recommendations and rapid adoption across sites of treatment. These landmark results from DeLLphi-305 suggest IMDELLTRA will further revolutionize the standard of survival earlier in the treatment journey and meaningfully shift the treatment paradigm for people facing this devastating disease. And that's why we are advancing IMDELLTRA through a broad Phase III program across first-line extensive stage and limited-stage SCLC while also pursuing more convenient administration. Together, these programs represent a combined addressable population of approximately 28,000 patients in the United States. We believe IMDELLTRA has the potential to become a foundational medicine across the small cell lung cancer continuum and will continue to be an important growth driver for our innovative oncology portfolio. We also recently announced positive top line results from the Phase III study of TEZSPIRE in people living with eosinophilic esophagitis EoE, a very challenging disease, as you know, which affects more than 470,000 people in the U.S. And today, we are pleased at this point -- at this podium here, we are pleased to announce the Phase III chronic [indiscernible] study of TEPEZZA in Japanese patients with thyroid eye disease met both primary endpoints with no new safety findings observed. These results reinforce our efforts to reach more patients in Japan as we continue to broaden TEPEZZA's reach and footprint outside of the U.S. Beyond these programs, our late-stage pipeline is progressing well and provides additional opportunities for growth. We're advancing MariTide, dazodalibep and xaluritamig in Phase III development, and all of these programs have the potential to address areas of significant unmet medical need. and to drive long-term growth for us. We continue to develop olpasiran targeting Lp(a) for cardiovascular risk reduction. Recently, as you have seen, a competitor announced top line results from their Phase III program targeting Lp(a), raising many questions for the field. And we look forward to seeing the detailed presentation of these data to better understand the potential implications for the field and for our ongoing clinical research with olpasiran. And now moving on to our biosimilar portfolio. We're advancing a third wave of biosimilar candidates to KEYTRUDA, OPDIVO, OCREVUS and EYLEA HD. We recently completed a Phase III study of ABP 234, our biosimilar candidate to KEYTRUDA, which met both primary and secondary endpoints. These full results will support our planned regulatory submission in the second half of this year. Additionally, for ABP-206, our biosimilar candidate to Opdivo, our biologics license application with the FDA has been submitted and accepted for review. We expect an FDA action on that BLA by end of the year. So as we look ahead, the business continues to do well, and we're excited about the future and our ability to deliver growth -- durable growth well into the next decade. And with that, Mohit, we're happy to take your questions.

Thank you. Thank you very much for this. I have to ask this question. How is Amgen different in your second act versus the first act?

It's -- yes, Amgen is a very different company in the sense that it has grown significantly. It's more than twice the size. The portfolio has expanded significantly. It has much more depth and breadth, as I said earlier, compared to when I joined 20 years ago for the first time. But I'm also a different executive coming back. As I said earlier, I did other stuff, 3 companies. I was an interim CEO in one, the common thread there was all growth acceleration. So it's really good to come back and bring understanding of what the company is and what its core is, which I always had huge respect for, which is really driving innovation and driving science and then complement that with the experiences I've made elsewhere and bring that back home. It's good to be back.

Awesome. Good to have you back. So let's just start with the Lp(a) I'm sure like let's just get it out because that's a question I'm sure -- right? Even from a failed trial, we learned a lot. So what do you want to learn from the detailed data when they come out, whenever they come out? Like what as investors we should be focusing on when the data come out in terms of endpoints, in terms of patient selection, like what are you focused on.

Yes. So I can just start briefly. Look, as you say, and as Thomas said, we need to have a thorough review of the data. Hopefully, it will be presented, published. We'll get a lot more insight then. I think we need to see how the components of the primary endpoint, which is a 4-point primary endpoint fall out, what were the baseline characteristics, particularly in terms of Lp(a), what was the reduction. I think those are going to be the key things. Obviously, we're somewhat differentiated in our design mechanism of action and impact on Lp(a) lowering with olpasiran. But we'll learn a lot, and hopefully, we'll see the data very soon.

Got it. Very helpful. Now coming to IMDELLTRA, congrats on the data. But I mean, this is like -- this is an access/question of community physicians treating a lot of small cell lung cancer because it was like -- this is the disconnect we saw when you were approved in second line plus. that academic doctors love it, but then community centers -- they found it will be difficult. So how can you bridge that gap? And what can you do to make sure that it gets adopted more widely?

Yes. It's a great question, Mohit. And look, I'm really proud of the work that we've done with IMDELLTRA, again, to Thomas' point, really revolutionizing the standard of survival in small cell lung cancer. I got the opportunity to meet one of our early clinical trial patients when I was in Europe over the summer who's been on a survival curve of greater than 5 years now, which is just absolutely incredible. When we look at the U.S., while there was a lot of talk in advance of the challenge potentially for community, we actually see very good community adoption of IMDELLTRA thus far. We've got over 2,000 sites that are using the product actively today. Now one of the remaining barriers to access in the community setting is the label currently identifies that we've required 22 hours of monitoring on the first 2 doses, which often is dealt with in a partnership with a local hospital to initiate therapy. We're really proud that in Europe, we've already achieved a 6- to 8-hour monitoring requirement, a significant reduction. And in the U.S., we filed and have a PDUFA date for a similar 6- to 8-hour monitoring reduction, which will continue to help that community physician process more and more patients. But importantly, when we look to DeLLphi-305 and the frontline maintenance data that we just announced, very importantly, in that study in the U.S. setting, monitoring was reduced to 1 to 2 hours overall. And so we are looking to expand on that great basis of overall survival use across all sites, but the reduced monitoring requirement will help that community even more going forward, especially as the patient population significantly expands to the 28,000 a year that Thomas mentioned in the frontline setting.

Got it. Very helpful. The other part I want to really focus on is the rare disease program. So you have found a lot of success with the rare disease assets. I mean some of them you got from Horizon acquisition. The trial that is reading out fairly soon is Sjogren's trial. So talk a little bit about your approach there. It has been a difficult disease, so what should be our expectation? And you have 2 different types of trials there. So just talk a little bit about that.

Yes, I can start and Kave maybe add some color. Sjogren's disease, 350,000 patients in the United States. We know it's an autoimmune B cell-driven disease. cardinal features or attack of the tear glands or lacrimal glands and the salivary glands debilitating features. Now about 30% to 40% of patients outside of the tear and salivary glands have systemic features. So the kidney is involved, the lung is involved. And somewhere between 60% and 85% of patients are symptomatic, okay? So those are the 2 populations, systemic and symptomatic. We have published data on a Phase II trial where we looked at both of those populations, and we saw clinically important statistically significant reductions in both of the endpoints. For systemic patients, it's the SDAI, DAI. And for the symptomatic patients, it's a reduction in SPRE [indiscernible]. And so we now have these 2 Phase III studies that are ongoing that would test both of those populations. And I think patients and physicians will want to see reduction in those 2 types of endpoints. And we have our Phase II data that we've built this program on. And so we remain optimistic that we'll get a positive clinical outcome.

Is there a reason to believe one trial has a better shot versus other?

We saw -- as I said, we saw benefit in both populations in the Phase II study. Biomarkers were reduced as well. There's a publication in Nature Medicine that talks about that. So as you said at the start, this is a high unmet medical need, very few effective therapies today, debilitating disease. So we're excited about this medicine and the benefit it could; have here.

Got it. And then do you think you have to be successful in both trials here? Or why is it?

No, I think they can probably stand on their own. And so as you say, we'll have the data in the coming months and we'll be able to go from there.

Exciting times.

Exciting times.

Right. So going back to you, Thomas. So the question, like I think -- like a broken record, I ask this question, and like I know the answer already. Amgen takes the margins very seriously. That's the answer. But I mean like you have been sitting at a very good margin profile, like 48% in second quarter of 2026, but then there's a lot of investment coming and then there's a little bit of like LOE period as well with some of the assets. So we would love to understand how do you balance the investments and those things, I mean, investments and pipeline. And the related question is, do you think you have enough in the pipeline? And do you think like -- you want to add more at this point?

Okay. Well, that's 2 questions, but let's take them one by one. There is an umbrella answer across both of them. And that is at a high level, we see significant opportunity across our 6 key growth drivers to drive growth forward and on our pipeline that we already have. So we are busy, and we see a lot of potential to grow. So on the first question is, so how do you now get that growth and that value creation going? And their margins do matter. I mean margins matter to us because they matter to you, our owners, our investors. Now we are committed and have worked really hard before my time to become a top-tier margin company, and we are committed to remaining one. Now at the same time, and that comes to your trade-off question here is we would be prepared to flex margins slightly downwards as we have done from the peaks that it was up in the 50s or so, if we see real opportunities to invest behind drivers that create long-term value. And when we say value, it's cash-on-cash returns, right, really hard value. So there, we would do that and trade that off against growth and value creation going forward. And look, this year is even a very good example. We're guiding to roughly 45% to 46% non-GAAP operating margin while doing all those investments. And what's the missing link in here or the key thing to focus on is actually productivity. It's productivity through process streamlining. Yes, of course, systems, AI very strongly to free up funds over here, but you can invest them over there to drive growth, to drive value creation and not have an either/or. It's actually an and. And then on the second part of your question, pipeline, yes, of course, the pipeline can always be full and even fuller. But honestly, here, when you look at it, what we have, we have a lot to work on. If you look at my prepared remarks earlier, I lined up a few for you. So that allows us to maintain a high bar for external innovation, and we have very clear criteria on those. I can walk you through what those are, but they are the same that we had before. And when an asset comes around that we feel meets those criteria, then we would go after it, but it's not something we need to do to fill a gap here, I say.

Got it. I mean this is your chance, Paul, to ask a CFO, do you have enough pipeline or do you need more?

We always need more funding. Yes. Look, we do have an amazing pipeline. We have amazing in-line medicines. We help millions of patients a year around the world. I think we have great sustainable growth for the remainder of this decade and into next decade as well.

Okay. Very helpful. And Paul -- sorry, Thomas, you mentioned that you are willing to flex the margin if you have growth profile -- if you have good opportunities. So at 45%, 46%, do you think you are at the low end of that range that you want to be or...

Yes. As I said, we are committed to remaining a top-tier margin company, and we have so many levers to pull. So I mean, we give guidance annually, 45% to 46% is the guidance we have for this year. And we are very, very careful because margins are a surrogate as close as you get to a cash equivalent. So we are very thoughtful of it. It matters to you. It matters to us. But we are not chasing the percentage per se, which would also be a problem because you know companies that chase margin percentages and then sacrifice growth and value creation stop. So we're doing both. We're conscious around it.

Completely makes sense. Kave, so a question for you. So now that we have really good data, [indiscernible] data with Repatha in hand, what are you seeing in marketplace? Because like are you seeing increased use in primary care or primary prevention plus primary care, 2 separate things here because statins are predominantly used in primary care segment. And that's a market which was a little bit late to adopt the injectables. So what are you seeing in this marketplace? And how do you see Repatha growing from there?

Yes. No, it's a great question. And again, we're super pleased with Repatha overall, if I remember correctly, and Casey, correct me if I'm wrong, 37% year-over-year growth -- last quarter, we announced also over 50% growth in new-to-brand prescriptions for the product. overall. We are seeing an inflection in use following the publication of the [indiscernible] data in the primary prevention setting. And that inflection Mohit is frankly coming from every segment that we're operating in. In the third quarter alone in the last several weeks, we're -- according to the IQVIA data, we've surpassed not only 15,000 new patients per week, but now 16,000 new patients per week at the end of August. And so we are seeing incredible growth. That growth is coming from both segments. It's coming from the primary care segment and the cardiology segment as the product gains greater and greater use backed by guidelines, which Paul can talk to a little more as well. And importantly, just at the end of August, we also received our approval for primary prevention in the EU. And so we are starting that launch cycle as well, but this is a global brand and this data will help power the growth well into the next decade across that global brand. But Paul, do you want to add anything further on the guidelines and the data?

Yes. No, thanks, Kave. The only thing Mohit, I would add is, clearly, we have the ACC/AHA multi-society lipid guideline that came out. Everybody should be below 100 if you have risk factors below 70 or even 55 if you have more risk factors. And the American Association of Family Practitioners, to Kave's point, is now endorsing that guideline as well, which is new, and I think will be very important as we continue to get further penetration into the primary care setting, very important.